Rocch Properties: advised not to sign, the guarantor gets 30 days to refinance

On January 31, 2025, the owner of a rental house on Ridley Boulevard in Toronto signed a guarantee of part of an $11.5 million loan to three Ontario companies, limited to $2,000,000 plus interest and costs and secured by a $2,000,000 collateral first-ranking mortgage on the house. The same day she signed an acknowledgement of independent legal advice confirming her lawyer's certificate. As Justice J. Dietrich's endorsement sets it out, the certificate records that the lawyer had advised her "not to execute the documents relating to the Guarantee, but [she] nevertheless advised that she was prepared to execute them," and was satisfied she was signing "freely and voluntarily and without fear, threat, influence or compulsion," per the Endorsement of Justice Dietrich, Oct. 19, 2026, paras. 8, 10–11.

The lender, Owemanco Mortgage Holding Corporation, advanced $11.5 million in original principal to 1954122 Ontario Ltd., Rocch Properties Inc. and 1000045722 Ontario Inc. under a commitment letter dated January 14, 2025. The companies' sole officer and director also guaranteed the loan, and his evidence is that his decision to sign "was dependent upon" her also providing the guarantee and the Ridley mortgage. In return for them she was granted a $3 million third mortgage over other property the companies own. The endorsement describes the house as "an income producing property and not the residence" of the guarantor, per the Endorsement of Justice Dietrich, Oct. 19, 2026, paras. 6–7, 9–10, 12. The loan matured on February 1, 2026 and, Justice W.D. Black recorded on August 5, remained unpaid, per the Endorsement of Justice Black, Aug. 5, 2026, para. 7.

On October 19, 2026, Justice Dietrich granted Owemanco's application for a receiver over the house. The guarantor had argued that there was a material issue about whether the guarantee and mortgage could be enforced, pointing to the circumstances in which she signed and the legal advice she received. The judge found that their enforceability "is not a material issue that would prevent the appointment of a Receiver," and gave her 30 days to refinance before the order can be taken out, per the Endorsement of Justice Dietrich, Oct. 19, 2026, paras. 2–3, 18, 36.

The companies' part of the application went first. On August 5, 2026, with no party opposed, Justice Black appointed The Fuller Landau Group Inc. as receiver over the three companies and all of their property; the Ridley house "will be contested separately," the judge wrote, per the Endorsement of Justice Black, Aug. 5, 2026, para. 3 and the Order (appointing Receiver), Aug. 5, 2026, paras. 2, 33.

A question narrowed to the lender

On enforceability, Justice Dietrich began with what the court was not deciding. The matter "is not a dispute between" the guarantor and a principal of the companies, who holds beneficial interests in them, and the court was not "deciding whether the independent legal advice received by [her] was appropriate." Rather, "the question is limited to enforceability of the Guarantee and the Ridley Mortgage as against the Lender," per the Endorsement of Justice Dietrich, Oct. 19, 2026, paras. 6, 19.

The law came from the Court of Appeal for Ontario's recent summary of it in Chand Morningside Plaza Inc. v. Healthy Lifestyle Medical Group Inc., 2026 ONCA 558, whose paras. 46–47 the endorsement quotes. A lender with actual or constructive knowledge of issues supporting a defence of undue influence must take reasonable steps to try to ensure that signers understand the transaction and enter it freely, the Court of Appeal said, and may do so by suggesting independent legal advice. But "any deficiencies in the independent legal advice are a matter between the lawyer who gives the advice and the clients who receive it, unless the lender knows or ought reasonably to have known of them. The lender is entitled to rely on a certificate of independent legal advice from a lawyer licensed to practice law in the jurisdiction, so long as the lender did not have any knowledge, direct or otherwise, that there is an issue of the authenticity or propriety of the independence of the legal advice," per the Endorsement of Justice Dietrich, Oct. 19, 2026, para. 20.

The only issue, then, was "whether the Lender knew or ought to have reasonably known that there was an issue of the authenticity or propriety of the independence of the legal advice," Justice Dietrich wrote, answering the guarantor's submission that a lender "cannot mechanically rely on a certificate of independent legal advice" with the Court of Appeal's formulation, per the Endorsement of Justice Dietrich, Oct. 19, 2026, para. 21.

What the certificate did not show

The guarantor pointed to things she said the lender knew that should have alerted it to potential undue influence, among them that she was not involved in the companies' business, that she was not receiving any of the $11.5 million and that she had refused to sign the transaction documents the day before. "However, none of that is the issue before me," the judge wrote. The endorsement's example of what does bear on the issue is Bertolo v. Bank of Montreal, where the allegedly independent advice came from a partner at the same firm as the borrower's counsel and the bank could not rely on it, per the Endorsement of Justice Dietrich, Oct. 19, 2026, paras. 23–24.